Aleksynska, Mariya and Gaisford, James and Kerr, William (2003): Foreign Direct Investment and Growth in Transition Economies.
Download (117Kb) | Preview
Recent studies of developing countries have suggested that the effectiveness of foreign direct investment (FDI) as spur to econo mic growth depends on the availability of "human capital" or skilled labour in a host country. In other words, it is primarily the synergy between FDI and human capital — rather than FDI itself — that acts as a strong stimulant to growth. Since many transition economies such as Ukraine have abundant human capital, this implies that policies that encourage FDI may be very beneficial in facilitating economic restructuring and stimulating growth. This paper provides a thorough empirical investigation of this issue by examining the experience of Ukraine and other transitional economies. The paper provides an overview of Ukraine’s experience with FDI and growth before systematically analyzing the connection between these variables for a panel of transition economies. While the paper finds deficiencies in earlier work examining the synergy between FDI and human capital, it finds interesting evidence that is consistent with the synergy hypothesis for transition economies. Further, the analysis also suggests that there is a complementary — rather than substitute — relationship between FDI and domestic investment. Thus, the presence of FDI may provide new learning opportunities for those making domestic investments and visa versa. The possibility that it is not large flows of FDI that cause high economic growth rates, but strong growth that acts as a magnet for FDI is also investigated. While the paper shows that there is little empirical evidence of such reverse causation in transition economies, it also reveals that there is little evidence that FDI stimulates economic growth beyond the current year. This lack of persistence in the benefits of FDI in transition economies suggests that there may be room for policy initiatives to increase the efficacy of FDI.
|Item Type:||MPRA Paper|
|Original Title:||Foreign Direct Investment and Growth in Transition Economies|
|Keywords:||foreign direct investment, spillovers from FDI, human capital complementarities, transition economies, growth|
|Subjects:||P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P33 - International Trade, Finance, Investment, Business, and Aid
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
|Depositing User:||Mariya Aleksynska|
|Date Deposited:||12. Mar 2008 01:43|
|Last Modified:||17. Feb 2013 18:26|
Balatsky, E., 1999. Foreign Direct Investment and Domestic Investment Activity”. Journal of World Economy and International Relations. No 11, pp. 83-89. Balasubramanyam, V., Salisu, M., Sapsford, D., 1996. “Foreign Direct Investment and Growth in EP and IS Countries”. The Economic Journal. Vol. 106. Issue 434. January, pp. 92-105. Barro, R., 1991. “Economic Growth in a Cross Section of Countries”. The Quarterly Journal of Economics. Volume 106. Issue 2. May, pp. 407-443. Barro, R.J., Sala-i-Martin. 1995.Economic Growth. New York: McGraw-Hill. Blomstrom M., Kokko A., 1998. “Multinational Corporations and Spillovers”. Journal of Economic Surveys. No 12. pp. 247-277. Blomstrom M., and Kokko A., 2003. “The Economics of Foreign Direct Investment Incentives”. NBER Working Paper Series. Working Paper 9489. Borensztein E, de Gregorio J., and Lee J., 1998. “How Does Foreign Direct Investment Affect Economic Growth?”. Journal of International Economics. Vol. 45, pp.115-135. Buckley P., Clegg J., Wang, C., and Cross A., 2002. “FDI, Regional Differences and Economic Growth: Panel Data Evidence from China”. Transnational Corporations. Vol. 11. No. 1, April, pp. 1-28. Campos N., 2002. “Foreign Direct Investment as Technology Transferred: Some Evidence From The Transition Economies”. The Manchester School Paper. Vol. 70 No.3. June, pp. 398- 412. Calvo Guillermo, Leiderman Leonardo, Reinhart Carmen. 1996. “Inflows of Capital to Developing Countries in the 1990s”. The Journal of Economic Pespectives. Vol 10. Issue 2. Spring, pp. 123-139. Coelli T., Rao D.S.P., and Battese G. E. 1998. “Introduction to Efficiency and Productivity Analysis”. Kluwer Academic Publishers. Garibaldi P., Mora N., Sahay R., Zettelmeyer J., 2002. “What Moves Capital to Transition Economies?” IMF Staff Paper. Vol. 48, Special Issue. Granger, C. W. J. 1987. “Causal Inference”. New Palgrave:Econometric. New York, W.W. Norton. Granger, C. W. J. 1980. “Testing for Causality”. Journal of Economic Dynamics and Control. 2. pp. 32-55. Greene, W.H. 2000. Econometric Analysis. Prentice Hall, New Jersey. Hausmann, R., Fernandez-Arias, E., 2000. “Foreign Direct Investment: Good Cholesterol?”. Inter- American Development Bank Working Paper No. 417 (Washington). Mankiw, N. Gregory, David Romer, David N. Weil. 1992. “A Contribution to the Empirics of Economic Growth”. Quarterly Journal of Economics. 107:2. pp. 407-37. de Mello, Luiz R., Jr., 1997. “Foreign Direct Investment in Developing Countries and Growth: a Selective Survey”. The Journal of Development Studies. 34 (1), pp.1-34. de Mello, Luiz R., Jr., 1999. “Foreign Direct Investment-led Growth: Evidence From Time Series and Panel Data”. Oxford Economic Papers 51. pp. 133 – 151. de Mello, Denizer, Gelb and Tenev. 1997. World Development Indicator; World Economic Outlook. World Bank Working Paper 1866. Morisset, J., 2003. “Using Tax Incentives to Attract Foreign Direct Investment”. The World Bank Group. Private Sector and Infrastructure Network . Note No. 253. Fisher and Sahay. 2000. “The Transition Economies After Ten Years.” IMF Working Paper. Feenstra, R., Markusen, I., 1994. “Accounting for Growth with New Inputs”. International Economic Review. pp. 429-447. Hirvensalo, Inkeri. 2001. “Foreign Direct Investment around the Baltic Sea. Is there Competition among the Counties in Attracting FDI?” Paper of the Center for Markets in Transition. July. IMF World Economic Outlook. October, 2000. Focus on Transition Economies. World Economic and Financial Surveys. IMF Yearbook. 2000. IMF Yearbook 2000. Kennedy, P., 1998. A Guide to Econometrics. MIT Press. Kholdy, S., 1995. “Causality between Foreign Investment and Spillover Efficiency”. Applied Economics, 27. pp. 745-9. Romer, David. 2001. Advanced Macroeconomics. McGraw-Hill Companies Inc., Romer, Paul, 1990. “Endogenous Technological Change”. Journal of Political Economy. Vol.98. October, pp. S71-S102. Schoors, Koen, van der Tol, and Bartoldus. 2002. “The Productivity Effect of Foreign Ownership on Domestic Firms in Hungary”. EEA Venice Conference Paper. Temple, J., 1999. “The New Growth Evidence”. Journal of Economic Literature. Vol. XXXVII. March, pp. 112-156.